Misc.

Question 1

What is the primary responsibility of the bank acting as registrar for capital stock

Answer 1

To prevent any overissuance of stock, and thereby verify that the stock is properly issued.

Question 2

T/F

Even if the client’s management has corrected significant misstatements found by the auditor, the auditor is still required to report those misstatements to management

Answer 2

TRUE

Question 3

T/F

The “user” auditor can make reference to a “service” auditor’s report as long as the user is satisfied with the servicer’s professional reputation and independence

Answer 3

FALSE

The user auditor should not make reference to the report of the service auditor

Question 4

An external peer review is required by GAGAS for auditors and audit firms every ____ years

Answer 4

Three

Question 5

When a CPA reports certain, uncorrected, illegal acts to the audit committee that the CPA believes are material enough to warrant a qualified audit opinion and the client fails to take the appropriate remedial action and the audit committee refuses to inform the SEC, what should the CPA do?

Answer 5

Deliver a report concerning the illegal acts to the SEC within one business day.

Question 6

T/F

The GAO doesn’t have standards of determining independence, rather they refer to the AICPA standards of independence of both mind and appearance

Answer 6

FALSE

The GAO determines that independence relates to both independence of mind and appearance

Question 7

Financial Projections are meant for who?

Answer 7

Limited Use.

Should not be broadly distributed to groups such as all employees or potential or current stockholders

Best for someone like a bank that the client is trying to obtain a loan from

Question 8

What are the factors an auditor should consider in making a judgment about whether an internal control deficiency is so significant that it is a significant deficiency?

Answer 8

I. Diversity of the entity’s business

II. Size of the entity’s operations

Question 9

T/F

A letter issued on significant deficiencies relating to an entity’s internal control observed during an audit of financial statements should include a restriction on the distribution of the report.

Answer 9

TRUE

Question 10

_________ involve identifying and preventing problems in an organization before they occur.

Answer 10

Feedforward controls

Feedforward controls are proactive and preventative. Feedforward controls are helpful to managers because they allow a manager to plan work effectively; they can regulate resources like employees, raw materials and capital ahead of time. This means that future problems can be avoided. Although feedforward controls can be costly and can slow down the planning process, they help to avoid problems later on.

Question 11

___ is information provided about an action that has already occurred and may be used to help adjust future actions.

Answer 11

Feedback controls

Question 12

________ systems are systems that prevent certain actions from occurring.

Answer 12

Preventive controls

Question 13

T/F

When an auditor assesses control risk at the maximum level, they don’t have to document anything; this is basically their way of deciding not to test controls and rather to do more substantive test. Since it’s a preference of what to test, it doesn’t need to be documented/justified.

Answer 13

FALSE

Document both the auditor’s understanding of the entity’s accounting system and the auditor’s basis for concluding that control risk is at the maximum level.

Question 14

What are detective controls?

Answer 14

Detective Controls are Feedback and Feedforward Controls

Question 15

T/F

Preventative controls are more costly than detective controls

Answer 15

TRUE

Question 16

T/F

Preventative controls are not as cost beneficial as detective controls

Answer 16

FALSE

They are more cost beneficial because they are more effective, easier to implement, and minimize time delays

Question 17

T/F

Preventative controls are included in both general accounting controls and in accounting transaction (application) controls

Answer 17

TRUE

Question 18

What are the five key components that Trust Services view a system consisting of? (DIPPS)

Answer 18

Infrastructure
Software
People
Procedures
Data

Question 19

In a Trust Services engagement, a CPA reports on whether a system meets one or more of what 5 principles? (SAPOC)

Answer 19

Security
Availability
Processing Integrity
Online Privacy
Confidentiality

Question 20

For each of the 5 principles that a CPA reports on in a Trust Services Engagement, the auditor considers what four criteria? (PCPM)

Answer 20

Policies
Communications
Procedures
Monitoring

Question 21

If one or more of the four criteria relating to a principle in a Trust Services Engagement has not been achieved, what type of report does the CPA issue?

Answer 21

Qualified or Adverse

Question 22

If management refuses to provide a written assertion for a Trust Services Engagement, what type of report does the CPA issue?

Answer 22

Disclaimer

Question 23

When a CPA is reporting on more than one principle of a Trust Services Engagement, do they issue one report or multiple reports?

Answer 23

They can either issue a combined report on all principles or individual reports on each principle

Question 24

T/F

A CPA can perform an examination, review, or AUP on a Trust Services Engagement

Answer 24

FALSE

Examination or AUP, not a Review

Question 25

What is the difference between a WebTrust and a SysTrust?

Answer 25

WebTrust = provides assurance on electronic commerce (websites). CPA is engaged to examine both that a client complied with Trust Services Criteria (uses procedures in accordance with its defined policies) and that it maintained effective controls

SysTrust = provides assurance on any defined system. CPA is engaged only to examine that a client maintained effect controls over the system

Question 26

What does SOC stand for?

Answer 26

Service Organization Reports

Question 27

T/F

Letters for underwriters are required by the Securities Act of 1933

Answer 27

FALSE

Question 28

T/F

Letters for underwriters are included in registration statements

Answer 28

FALSE

Question 29

T/F

When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statements should be marked as unaudited

Answer 29

TRUE

Question 30

T/F

When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statements should be withheld until audited

Answer 30

FALSE

Question 31

T/F

When unaudited financial statements are presented in comparative form with audited financial statements in a document filed with the SEC, such statements should be referred to in the auditor’s report to discuss responsibility for the PY unaudited FSs

Answer 31

FALSE

Question 32

In connection with a proposal to obtain a new client, an accountant in public practice is asked to prepare a written report on the application of accounting principles to a specific transaction. The accountant’s report should include what statement?

Answer 32

That any differences in the facts, circumstances, or assumptions presented may change the report

Question 33

What does COSO stand for?

Answer 33

Committee of Sponsoring Organizations

Question 34

The GAO standards of reporting for governmental financial audits incorporate the AICPA standards of reporting and prescribe supplemental standards to satisfy the unique needs of governmental audits. What is a supplemental reporting standard for governmental financial audits?

Answer 34

Auditors should report the scope of their testing of compliance with laws and regulations and of internal controls.